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POWER GRID CORPORATION INDIA LIMITED (PGCIL)
BUY Target Price:Rs.114.00CMP: Rs.92.35 Market Cap.: Rs.388686.50mn.
Date: February 26, 2009
Key Ratios:
Particulars FY08 FY09E FY10E
OPM(%) 87 90 92
NPM(%) 31 25 33
ROE(%) 10.7 10.1 13.2
ROCE(%) 8.6 8.8 9.0
P/BV(x) 3.19 2.12 2.52
P/E(x) 29.77 25.69 17.08
EV/EBDITA(x) 10.70 8.10 7.46
Key Data:Sector Power
Face Value Rs.10.00
52 wk. High/Low (Rs.) 113.75/51.75
Volume (2 wk. Avg.) 988722
BSE Code 532898
SYNOPSISWe initiate the coverage of PGCIL and set a target
price of Rs.114.00 for long term.
PGCIL, a NAVRATNA PSU, is Indias principalelectric transmission company.
PGCIL is planning to invest a sum of Rs.550 billionover the next five years for strengthening the
national grid, including inter-regional transmission
system strengthening schemes.
The company is planning to increase the inter-regional power transfer capacity of the grid to
more than 37,000MW by 2012.
The company is eyeing opportunities in West Asiaand the African markets
Currently in the process of setting-up a newsubsidiary to handle the power management
functions of the company.
The topline and bottomline of the company isexpected to grow at a CAGR of 25% and 23%
respectively over FY07 to FY10E.
Share Holding Pattern:V.S.R. SastryVice President
Equity Research Desk
91-22-25276077
vsrsastry@firstcallindiaequity.com
Dr. V.V.L.N. Sastry Ph.D.
Chief Research Officer
drsastry@firstcallindia.com
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Table of Content
Content Page No.
1. Investment Highlights 032.
Company Profile 08
3. Peer Group Comparison 324. Key Concerns 325. Financials 336. Charts & Graph 357. Outlook and Conclusion 368. Industry Overview 37
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Investment Highlights
Result UpdatesThe topline of the company increased 36% YoY to Rs.14774.40mn from Rs.10857.70mn of the
same period of the last year while bottomline has slipped into red by 3.1% YoY and stood at
Rs.3723.50mn. EPS of the company for the quarter stood at Rs.0.88.
Expenditure of the company for the quarter stood at Rs.2504.90mn from
Rs.1976.40mn.i.e, an increase of nearly 27%YoY. Staff cost for the quarter accounts for
10% of the revenue for the quarter and O&M expenditure accounts 7% of the revenue
of the quarter.
Interest expenditure increased 2.15times in comparison with the corresponding quarter
of the previous year and stood at Rs.6002.60mn. OPM and NPM for the quarter declined
to 88.81% and 25.2% respectively from 91.74% and 35.39% respectively.
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Revenue from transmission segment contributes 89% of the total revenue of thequarter and that from consultancy, ULDC/RLDC and telecom contributes 4%,4% and 3%
respectively. Details of segment-wise revenue are given below:
Segment Dec.08 Dec.07 % Chg.
Transmission 13954.2 10459.1 33%
Consultancy 589.6 627.1 -6%
ULDC/RLDC 664.5 457.7 45%
Telecom 427.6 309.7 38%
National Load Dispatch Centre (NLDC)The company has dedicated its National Load Dispatch Centre (NLDC) to the nation in
Feb. 2009. The NLDC is connected with 5 RLDCs which in turn are connected to 31 state
load dispatch centres. NLDC at Delhi is having a back-up at ERLDC, Kolkata. The set-up
cost for this is Rs.45.0cr.
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DividendThe board has proposed interim dividend at 5% on equity share capital of the company
for FY09. This means that Rs.0.50 per equity share of Rs.10.00 each.
Establishment of New Transmission Lines
The company will invest Rs.7032cr. over next four years to establish transmission lines
to supply power generated from Sasan UMPP to the electricity grid. Sasan UMPP,
owned by Reliance Power, is having a generation capacity of 4000MW of electricity.
These transmission lines will supply power to Madhya Pradesh, Punjab, Delhi, Uttar
Pradesh, Rajasthan, Haryana and Uttarakhand. This UMPP is expected to start
commercial operation by 2012.
Power grid has plans to invest Rs.55000cr. in establishing transmission lines during the
11th
five year plan. The company has invested Rs.6615cr. in the first year of the plan and
has a target to invest Rs.8000cr. in the current fiscal.
External FundingPGCIL has signed an agreement with World Bank (WB) for USD 400mn. The loan will be
utilized to fund power grids transmission project during the eleventh plan. The
company has targeted to invest Rs.55000cr. on projects during the eleventh five year
plan.
Accomplishment of Transmission LineThe company has completed 220km. transmission line in Afghanistan. The project has
been funded by Indian Govt. under the assistance programme to Afghanistan.
Formation of New SubsidiaryThe company is in the process of forming a new subsidiary to take care of the power
management functions of the company. The new subsidiary is expected to form by
March 2009.
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Joint Venture With NTPCPGCIL and NTPC have recently signed a deal to form a short-circuit testing joint venture.
Rs. 94.36 billion Investment PlansThe company has approved an investment of Rs.94.36 billion in the current fiscal yearfor its various projects. The investment constitutes common scheme and network for all
the four regions at an estimated cost of Rs.70.75billion. The company has also approved
for supplementary transmission systems associated with Damodar Valley Corporation
and Maithon Right Bank Projects at an estimated cost of Rs.23.61billion.
New Joint Venture
PGCIL and Teesta Urja has joined together to form a new company called Teesta Valley
Power Transmission. PGCIL & Teesta Urja have 26% and 74% stake respectively in the
joint venture. The project is likely to bear an estimated cost of Rs 7.08 billion, including
construction of 400 kv D/C Teesta - Mangan Transmission line (approx. length 10 kms)
and 400 kv D/C Mangan-Kishanganj Transmission Line (Approx. length 180 kms). The
project is planned for completion by September, 2011. The new company will develop
associated transmission system for evacuation of power from 1200 mw Teesta-III hydro
electric project (HEP) being developed in Sikkim by Teesta Urja. The project will be
based on build, own & operate (BOO) basis and will also provide transmission capacity
upto Kishanganj s/s of Power Grid to various private HEPs being developed in North
Sikkim.
Highlights of FY08 PerformanceDuring FY08, PGCIL commissioned transmission projects worth about Rs.6,000crores
thereby adding transmission network of 7350 circuit kms, 9 EHV Ac sub-stations and
transformation capacity of more than 13,700kVA.
Major projects commissioned during the year include, Kahalgaon-II (phase-I)
Transmission System (Rs.2830 crore), Vindhyachal-III Transmission System (Rs.690crore), 400 kV D/C Bina-Nagda Transmission Line ( Rs.388 crore), System Strengthening
III of Southern Region (Rs.285 crore). These additions to Power Grids network have
helped in improving power supply situation in various regional grids, facilitating
enhanced inter-regional power transfer capacity and reliability of the system.
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In FY08, PGCIL is operating around 67,000 ckt. Kms. Of transmission lines along with 111
sub-stations with transportation capacity of more than 73,000 MVA. With the use of
state-of-the-art preventive maintenance techniques, average availability of transmission
systems during the year 2007-08 was maintained at 99.65%. PGCIL continues to wheel
about 45% of total power generated in the country through its transmission network.
In FY08, about 43,000MUs of inter-regional energy transfer was facilitated, an increase
of about 13% compared to the previous year (about 38,000MU). Growth of inter-
regional power exchange has helped in meeting more demand in energy deficit regions
besides achieving overall economy.
Under open access, more than 9,560 transactions were approved during the year
involving 30,000MUs of energy compared to 5787 transactions and 23,000MUs of
energy in FY07, increase of 30%. Energy worth about Rs.10,100 cr. transacted throughUI mechanism compared to Rs.6,814cr. in FY08, an increase of 48%.
During FY08, the company entered the capital market with an IPO of 573.9million equity
shares of Rs.10 each. Overall, the issue was subscribed 64.50times; the institutional
investors segment about 116 times and HNI 40 times.
During FY08, PGCIL secured 34 nos. of new consultancy assignment with project cost of
about Rs.1,840cr.l Company has realized consultancy fee of about Rs.235 cr. from its
ongoing consultancy projects during the year.
From its telecommunication business, PGCIL received revenue of Rs. 125 Crore during
FY 2007-08, a growth of 62% over last year (Rs. 77 Crore). Today, PGCIL is serving major
telecom players in mobile & NLDO segment and is also planning to tap customers in
entertainment and broadcasting industry.
The net sales of the company for FY08, increased by 15.2% at Rs.46,148.20million. The
net profit of the company stood at Rs.14,484.70 mn. i.e., 15.44% increased compared to
the previous year. Earning Per Share (EPS) of the company stood at Rs.3.60 for FY08.
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The expenditure of the company stood at Rs.10,518.00million, interest at Rs.13,395.50
million and depreciation at Rs.9596.50mn. During FY08 the company has paid
Rs.2820.00mn as tax.
Company Profile
Power Grid Corporation of India Limited (PGCIL) was incorporated on October 23, 1989 with an
authorized share capital of Rs.5,000 crore as a public limited company, wholly owned by the
Government of India. PGCIL started functioning on management basis with effect from August
and took over transmission assets from NTPC, NHPC, NEEPCO and other central / Joint sector
organizations during 1992-93 in a phased manner. In addition to this, it is also took over the
operation of existing Regional Load Despatch Centers from CEA, in a phased manner, which
have been upgraded with State-of-the art Unified Load Despatch and Communication (ULDC)
schemes. According to its mandate, the Corporation, apart from providing transmission systemfor evacuation of central sector power, is also responsible for Establishment and Operation of
Regional and National Power Grids to facilitate transfer of power within and across the Regions
with Reliability, Security and Economy on sound commercial principles.
Based on its performance PGCIL was recognized as a Mini-ratna company by the Government of
India in October 1998. PGCIL, notified as a Central Transmission Utility of the country, is playing
a major role in Indian Power Sector and is also providing Open Access on its inter-state
transmission system. In 2008, the Government of India has declared the company as a
NAVRATNA PSE.
PGCIL, as ISO 9001 certified company, has acquired in-house expertise at par with global
standards in the field of planning, Engineering, Load Despatch and Communication,
Telecommunication, Contracting, Financial and Project Management. PGCIL is executing various
consultancy assignments in these areas as a part of its Business Development Activity.
PGCILs first International Consultancy Contract with Bhutan Telecom for establishment of
OPGW system on turnkey basis in the Royal Kingdom of Bhutan was successfully completed on
schedule. As a result of on-going initiatives being undertaken in PGCIL to make its presence felt
internationally in dealing with all facets of power system, PGCIL in association with M/s Sigma
Enterprises , a Dubai based Co., has secured the prestigious International Consultancy
assignment against stiff competition from Dubai Electricity & Water Authority (DEWA) for
providing engineering consultancy services for 2x400kV GIS sub-stations and associated
Overhead Transmission Lines. The scope of the consultancy includes all activities like design,
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planning, engineering, EIA studies, preparation of tender documents, evaluation, assistance in
pre-award discussions & negotiations, preparation of award letters, inspection and witnessing
of type testing, site supervision, project management, payment certification and resolution of
corridor and outage requirement and co-ordinate for approval from various concerned
authorities in Dubai. The company has bagged two consultancy assignments in Afghanistan
against stiff competition from other international consultants.
PGCIL, in its efforts to ensure delivery of quality power and to maintain grid discipline,
implemented Availability Based Tariff (ABT) in all the five regions. This has stabilized the
frequency to prescribed banned as par IEGC i.e. 49.0Hz to 50.5Hz for large percentage of time
in all the five regions. ABT has also encouraged inter-state and inter-regional bilateral trading
resulting in meeting higher demand from the existing sources. Merit order operation of
generating units is gaining importance and many states are utilizing this facility to utilize the
system commercially. There is overall improvement in Grid stability and partial blackouts have
been drastically reduced, while it has been possible to save the grid from total blackouts.
PGCIL has envisaged establishment of an integrated National Grid in the country by the year
2012 with an inter-regional power transfer capacity of over 37,000MW. A perspective
transmission plan has been evolved for strengthening the regional grids with ultimate objective
of establishment of strong and vibrant National Grid to support the generation capacity
addition program of about 78,000MW during XI pan.
Efforts made by PGCIL in modernizing the Regional Load Despatch Centers (RLDCs),
implementation of Availability Based Tariff (ABT), power transfer through inter-regional links
and effective Operation & Maintenance measures using State-of-the-Art technologies have led
to overall improvement in power supply position in all parts of the country. It is demonstratedby the fact that there has been no major grid disturbance during in any part of the country in
the last 5 years.
PGCIL has taken lead role and making contributions in Govt. of Indias nation building schemes
of Accelerated Power Development and Reforms Programme (APDRP) and Rajiv Gandhi
Vidyutikaran Yojana (RGGVY) towards brining qualitative improvement in the distribution
sector.
Under APDRP, PGCIL is acting as Advisor-cum-Consultant (AcC) to lend its managerial and
technical expertise for improvement of distribution system in 177 distribution circles / towns/schemes spread over 18 states costing about Rs.6,626 crore. 81% of these schemes have been
commissioned and the remaining sanctioned schemes are expected to be completed by March
2009. PGCIL is also implementing some of these schemes on deposit work basis under bilateral
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arrangement in State of Bihar, Goa, Meghalaya, Uttar Pradesh, Tripura and Gujarat at a cost
about Rs.1,100 crore, 90% of which has been completed.
Under RGGVY, PGCIL has been assigned the job for execution of rural electrification in 68
districts covering 87,300 villages at an estimated cost about Rs,9,400 crore. Cumulatively, PGCIL
has electrifies 22,082 villages including 3 lac. BPL connections. During FY 2007-08, more than
5,000 nos. of villages were electrified by PGCIL.
Subsidiaries
The company is having two subsidiaries and none of them is neither a listed company nor a sick
unit.
1. Parbati Koldam Transmission Company Limited (PKTCL).PKTCL was originally incorporated as Bina Dehgam Transmission Company Limited
(BDTCL) on September 2, 2002 with the objective of establishing the 400KV D/C Bina-
Nagda and 400KV D/C Nagda-Dehgam transmission lines. BDTCL was envisaged to be
transferred to an Independent Private Transmission Company (IPTC). The proposed
IPTC failed to get the license from the CERC. Hence, the Board of Directors decided that
BDTCL should be engaged in the implementation of the Parbati and Koldam
transmission systems through the joint venture route. The name of the company was
subsequently changed to Parbati Koldam Transmission Company Limited with effect
from December 30, 2005.
2. Byrnihat Transmission Company Limited (BTCL)
BTCL was incorporated on March 23, 2006. BTCL has been formed with the objective of
undertaking the implementation of the 220 KV D/C Misa Byrnihat transmission line.
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Joint Ventures
PGCIL is having the following joint ventures with different companies.
1. Powerlinks Transmission Limited (PTL)This is a joint venture between PGCIL(49%) and Tata Power (51%). PGCIL is responsible
for implementing the entire transmission system associated with the Tala Hydro-Electric
Project being developed at Bhutan. The company has entered into a joint venture
arrangement with The Tata Power Company Limited (Tata Power) for establishing
specific transmission lines associated with the Tala Hydro-Electric Power Project. (Tala
JV Transmission Project) on a BOOT basis. The joint venture company PTL has been
incorporated pursuant to this joint venture agreement for the purpose of implementing
the Tala JV Transmission Project.
2. Torrent Power Transmission Private Limited (TPTPL)This is the joint venture between PGCIL (26%) and Torrent Power Limited (74%). Torrent
Power Limited (Torrent) is implementing a power generation project at Akhakhol in
Surat, Gujarat. The company has entered into a joint venture arrangement with Torrent
for establishing associated transmission lines for the aforesaid generation unit (Sugen
Transmission Project). The joint venture company TPTPL has been incorporated
pursuant to this joint venture agreement for the purpose of implementing the Sugen
Transmission Project on a BOO basis. The joint venture with Torrent Power Limited
consists of 496 circuit kilometers of transmission line and one sub-station with a
capacity of 1,100 MW and is expected to be completed by Fiscal 2010.
3. Jaypee Powergrid Limited (JPL)This is the joint venture between PGCIL (20.63%) and Jaiprakash Hydro-Power Limited
(79.37%). Jaypee Karcham Hydro Corporation Limited (JKHCL) is setting up a 1,000
MW power generation project at Karcham in Kinnaur, Himachal Pradesh. PGCIL have
entered into a joint venture arrangement with Jaiprakash Hydro-Power Limited
(Jaiprakash) for establishing associated transmission lines for the aforesaid generation
unit (Karcham Transmission Project) on a BOO basis. The joint venture company JPLhas been incorporated pursuant to this joint venture agreement for the purpose of
implementing the Karcham Transmission Project. The joint venture with Jaypee
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Powergrid Limited consists of 468 circuit kilometres of transmission line with a capacity
of 1,000 MW and is expected to be completed by Fiscal 2011.
4. Power Grid- Reliance Energy Joint VentureThe Company has entered into a Joint Venture with Reliance Energy Ltd. The Joint
Venture Company has in its scope execution of about 300 kms. Transmission Lines from
Parbati to Koldam and Koldam to Ludhiana. The Company will have a 26% equity holding
in the Joint Venture Company and Reliance Energy Ltd will have 74% equity holding. The
above lines are part of elements of the Transmission system associated with Generation
Projects viz. Parbati-II HEP and Koldam HEP. NHPC is establishing 800MW Parbati-II HER
and NTPC is establishing 800MW Koldam HEP in the state of Himachal Pradesh.
5. POWERGRID IL&FS Transmission Pvt LtdPower Grid Corporation of India and Infrastructure Leasing & Financial Services(IL&FS)
entered into a joint venture to form the new joint venture (JV) company named`POWERGRID IL&FS Transmission Pvt Ltd`. Both, the company and IL&FS will have 50%
stake in the company. The main objective of the company is to undertake activities of
project development of intra transmission and sub-transmission works for state power
utilities, under Public-Private-Partnership (PPP) route within India and abroad including
Interconnection with neighbouring countries subject to bilateral agreement between
the countries. This JV will facilitate project preparation and development work for State
Transmission Units (STUs) and will act as a bid process coordinator (BPC) of STUs and
manage the bidding process for selection of the private Implementing agencies. The
joint venture company also has objective to undertake transmission projects in theneighbouring countries.
Company Business
The core business of the company is electric power. The company own and operate a large
network of transmission lines and infrastructure that constitutes most of Indias interstate and
inter-regional electric power transmission system and carries electric power across India.
The Indian power system has historically been divided into five regions for the planning andoperation of electricity generation, transmission and distribution, namely the Northern,
Southern, Eastern, Western and Northeastern Regions. In general, the Eastern and
Northeastern Regions generate more electricity than they consume and the other regions
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generate less electricity than they need. As a result, one of the overriding tasks of the
companys transmission business is to move electricity from the high generation regions to high
consumption regions.
As the owner and operator of most of the Inter State Transmission System (ISTS), the company
expands system progressively, connect new customers to the system and operate and maintain
the system.
Operating and Maintaining the ISTS
PGCIL carry out the day-to-day operations of the ISTS. The company takes continuous actions
regarding operation and maintenance to seek to ensure compliance with prescribed standards
as well as to achieve high availability of the system for uninterrupted power supply to
customers.
Maintenance of the ISTS involves the routine inspection and overhaul of transmission system
assets and the replacement of components. Condition assessment and monitoring techniques
are used to help optimise maintenance intervals and reduce system outages. PGCIL have
developed flexible working practices to take advantage of the system conditions for day-to-day
maintenance work and also modify the annual maintenance programme according to
generation maintenance schedules. The company also uses techniques such as live-line working
to enable certain types of maintenance to be carried out without taking transmission lines out
of service. Emergency restoration systems (ERSs) are used for early restoration in case of
natural disasters and other exigencies.
Renewal of the ISTS involves the refurbishment or replacement of transmission system
components. The company seeks to maintain inventories at optimal levels for system
requirements. PGCIL plan the renewal program through assessments of plant and equipment
conditions, reliability and life expectancy. Part of the ISTS was constructed in the 1980s and
1990s and consists principally of major assets with technical life of between 25 and 35 years.
The combination of these factors is taken into account in planning the renewal program.
Other Roles in Transmission
As the CTU, PGCIL participate in the following activities:
Undertaking the transmission of electricity through the ISTS; Planning and coordination relating to the ISTS, including coordination among state
transmission utilities, the GoI, state governments, generating companies, the regional
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power committees, the CEA, transmission licensees and any other parties deemed
appropriate by the GoI;
Ensuring development of an efficient, coordinated and economical interstatetransmission lines for the smooth flow of electricity from generating stations to load
centres; and
Providing non-discriminatory open access to the transmission system for use by anylicensee, generating company or consumer as and when such open access is required by
the applicable regulatory commissions in the various Indian states.
Open Access
The Electricity Act, 2003, requires transmission utilities to provide customers with non-
discriminatory open access to capacity, as available, in the utilities transmission networks.
CERC has issued regulations in respect of open access and instructed us, as the CTU, to
formulate a detailed procedure to facilitate the open access of the ISTS. In line with CERC open
access regulations, PGCIL provide the following two types of services to open access customers:
i. Short Term Open Access:Under this category of service, access is provided for a maximum period of three
months. Access is available on one of the following bases: advanced reservation (three
months in advance); first-come-first-served; day ahead; or same-day. The nodal RLDC is
entrusted with the responsibility of short term open access application processing and
scheduling, while making sure that the provision of short term open access applied for
will not affect the security of the grid. The company charge for short term open access
at rates equal to 25% of its applicable regular fixed charges for regional access and 50%
of its applicable regular fixed charges for inter-regional access. The company retains
25% of the short term open access charge and pass 75% of the charge on to its regular
customers in the form of rebate adjustments to their bills. However, CERC is presently
considering the removal of the short term open access charges.
ii. Long Term Open Access.Under this category of service, open access services are made available to customers
located anywhere in the country for a period of not less than 25 years. Any required
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augmentation of the transmission system must be done in consultation with PGCIL. The
customer is also required to enter into agreements with generators and other relevant
utilities.
Completed Projects
The following are some of the large or otherwise more notable completed projects of the
company:
Project Project Cost as per
tariff petition
submitted to CERC
(in Rs. Million)
Date of commissioning
System Strengthening Scheme in EasternRegion (Formerly part of Tala Suppl.)
3,130 February, 2007
Northern Region System Strengthening
Scheme-II
2,038 December,2006
Dulhasti Combined Transmission System 4,673 October, 2006
East-North Interconnection and Northern
Region Transmission System associated
with Tala HEP
5,220 August, 2006
Tehri Transmission System 8,610 May, 2006
Tala- Silliguri Transmission System 2,616 May,2006
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Rihand-II Transmission System 8,359 October, 2005
Tarapur 3&4 Transmission System 2,510 August, 2005
ULDC- West Region 1,574 August, 2005
Madurai-Thiruvananthapuram
Transmission System
2,478 July, 2005
ULDC- Eastern Region 2,835 June, 2005
Raipur- Chandrapur Transmission System 2,478 May, 2005
Augmentation of Capacity of
GajuwakaHVDC B/B Project
6,186 February, 2005
ULDC-Northeastern Region 1,907 June, 2003
East- South Interconnector ( Talcher-II
Trans. System)
30,007 April, 2003
System Strengthening of Southern Region 3,450 February 2003
East- West Inter-regional Links ( Raipur- 1,985 January 2003
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Rourkela)
Ongoing Projects
i. Transmission Lines
Sl. No. Name of the Trans line Length
(CKM)
GoI /
BoD
Appl.
Cost
(Appd.)
/
Ant.
Progress of Construction Completion Tgt.
Locs.
(no.)
Stubs
Setting
(no.)
TowerE
rect.
(no.)
Strng.(
ckm)
Sch. Ant./ Ac
1.0 INTER REGIONAL SYSTEMS
1.1 Kahalgaon Stage-II (Phase-II)
Trans. System
(400KV D/C Ranchi - Sipat
line)
816 Jan'05 464.02 1123 1088 1082 738 Oct'07 Sep'08
1.2 Trans. System associated
with Barh Gen. Proj. (3x660MW)
2447 Dec'05 3779.5 3707 2310 1927 648 Sep'09 Sep'09
1.3 Trans. System associated
with North-West Trans.
Corridor Strengthening
Scheme
600 Jan'06 483.10 987 700 425 168 Jan'09 Jan'09
1.4 East-West Trans. Corridor
Strengthening Scheme
1230 Jun'06 803.70 1614 108 Jun'09 Mar'10
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2.0 NORTHERN REGION
2.1 Northern Region System
Strengthening Scheme - I
(Balance portion)
91 Jan'04 271.80 252 252 252 91 July'07 May'0
2.2 Northern Region System
Strengthening Scheme - III
180 Jun'04 230.52 404 404 404 180 Mar'08 Mar'08
2.3 System Strengthening
Scheme in Uttranchal
50 Jun'04 76.42 81 73 64 8 Mar'07 Dec'09
2.4 RAPP 5 & 6 Trans. System. 448 Jun'05 499.45 687 612 588 407 Mar'08 Dec'08
2.5 Koteswar Trans. System 36 Jun'05 260.34 84 73 27 Jun'08 Sep'09
2.6 Sewa - II Trans. System 209 Jul'05 98.47 345 330 290 150 May'0
8
July'08
2.7 Koldam HEP Trans. System 396 Sep'05 464.91 502 115 69 18 Sep'08 Sep'08
2.8 Trans. System associated
with PARBATI-II HEP. (to be
executed under JV)
129 Dec'05 358.42 323 Dec'08 Sep'10
2.9 System Strengthening
Scheme in Roorkee
(LILO of Rishikesh -
Muzaffarnagar 400KV S/C
line at Roorkee)
3 Dec'05 109.95 12 May'0
9
May'0
2.10 Northern Region System
Strengthening Scheme - V
1222 Jun'06 721.25 1726 866 539 284 Jun'09 Jun'09
2.11 Trans. System Associated 543 Jul'06 557.24 Jan'10 Jan'10
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with PARBATI-III HEP
2.12 URI - II HEP Trans. System 114 Oct'06 238.25 320 32 May'1
1
May'1
2.13 System Strengthening in
South-Western part of
Northern Grid (Part-A)
Scheme
496 Oct'06 381.28 682 429 274 118 Apr'09 Apr'09
2.14 System Strengthening in
South-Western part of
Northern Grid (Part-B)
Scheme
187 Oct'06 150.26 513 243 169 12 Oct'09 Oct'09
2.15 Northern Region System
Strengthening Scheme - VIII
68 Oct'06 220.69 179 11 Dec'09 Dec'09
2.16 Northern Region System
Strengthening Scheme - VI
54 Jan'07 186.95 82 10 July'09 July'09
2.17 CHAMERA - III HEP
Transmission System
343 Sep'07
/
Apr'08
559.47 July'11 July'11
2.18 Northern Region System
Strengthening Scheme - X
510 Dec'07 408.36 690 3 Dec'10 Dec'10
2.19 Northern Region System
Strengthening Scheme - XI
320 Dec'07 417.76 Dec'10 Dec'10
2.20 Northern Region System
Strengthening Scheme - XII
104 Feb'08 261.55 Nov'10 Nov'10
3.0 WESTERN REGION
3.1 SIPAT Trans. System Stage - I
(Balance Portion )
354 Dec'03 1672.9
8
958 958 958 354 Feb'07 Apr'08
3.2 Western Region
Strengthening Scheme - I
298 Jul'04 199.21 410 410 410 298 Nov'07 Jun'08
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(400KV D/C Sipat - Raipur )
3.3 Sipat - II Supplementary
Trans. System
1123 Jun'05 813.67 1822 1473 1027 229 Jun'08 Dec'08
3.4 Western Region
Strengthening Scheme - III
65 Feb'06 75.65 125 125 119 61 Aug'08 Jun'08
3.5 Western Region
Strengthening Scheme - II
7075 Jul'06 5221.2
3
(3581.4
0-PG &
1639.8
3 JV)
2551 602 148 July'10 July'10
3.6 Trans. System associated
with Gandhar-II (GBPP)
850 Aug'06 653.21
3.7 Western Region
Strengthening Scheme - V
435 Dec'07 477.69 648 8 Sep'10 Sep'10
3.8 Western Region
Strengthening Scheme - VI
112 Feb'08 340.72 Nov'10 Nov'10
4.0 SOUTHERN REGION
4.1 Kaiga 3 & 4 Trans. System 759 Mar'05 588.25 1133 836 790 479 Dec'07
4.2 Neyveli TS - II Trans. System 830 Jan'05 691.83 1218 1165 1006 501 Dec'07 Aug'09
4.3 Kundankulam - APP Trans.
System
1844 May'05 1779.2
9
2263 1618 1542 1059 Nov'08 Nov'08
4.4 System Strengthening -VII of
SR
248 Apr'05 279.30 346 221 121 18 July'09 July'09
5.0 EASTERN REGION
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5.1 Trans. System Associated
with TEESTA -V HEP
(400KV D/C Teesta-V HEP -
Siliguri)
226 Jan'04 208.75 341 341 341 226 May'0
8
May'0
5.2 Eastern Region
Strengthening Scheme - I
1142 Oct'06 975.96 1593 675 86 Oct'09 Oct'09
5.3 Eastern Region
Strengthening Scheme - II
146 Dec'07 227.52 365 Jun'10 Jun'10
5.4 Transmission System for
Start - up Power to DVC and
Maithon Right Bank Gen.
Project.
320 April'08 290.49 698 April'1
0
April'1
6.0 NORTH EASTERN REGION
6.1 NER System Strengthening
Scheme - I (Missing link
Trans. System in NER)
14 May'06 58.93 43 Sep.'0
9
Sep.'0
6.1.1 132KV S/C Kopli - Khandong 12 40 Sep.'0
9
Sep.'0
6.1.2 LILO of 132KV Dimapur -
Kohima at Dimapur (PG)
2 3 Sep.'0
9
Sep.'0
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ii. National Load Dispatch & Communication System
Sl.
No.
Name of the
Scheme
GoI /
BoD
Appl.
Cost
(Apprvd.)
Ant.
Status of Construction Completion Tgt.
Schedule Ant./Act
1.0 National Load
Despatch
Communication
May'05 44.96 Engg. in progress in EMS/SCADA
packages & Telecom package. FAT
completed in Telecom packageof
NR link. Civil works under progress.
Equipment supplied & erection
under progress. SAT commenced.
Data base updation under progress.
May'08 July'08
EMS/SCADA
Package
Telecom
Equipment
Project Implementation
PGCILs project implementation capabilities encompass all facets of a project development,
from conceptualization to construction to the commissioning of a project, at which point it can
begin operation.
The company have adopted an integrated project management and control system (IPMCS)
for the planning, monitoring and execution of projects. Under the project management system,
various project implementation activities are broken down with identified key milestones to
enable the monitoring and control of critical paths of implementation. Project procurement is
divided into well defined contracts to be awarded through competitive bidding. Following the
award of contracts, integrated plans govern the implementation of the project, including
control of the quality of materials and work during construction.
i. Planning & ConceptualizationOn an ongoing basis, PGCIL interact with various departments of the GoI and with
generating companies, traders and the state utilities, in order to plan and evaluate
implementation of new transmission projects so as to ensure that the goals of
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adequacy, reliability and security of the electric power system are achieved. Among
many other factors, the companys planning efforts take into account possible future
transmission configurations for interconnected areas, optimal utilisation of rights of
way, grid operational constraints, environmental and social effects and cost
comparisons. Based on the ongoing planning, the company is able to formulate views in
respect of the appropriateness and feasibility of projects that have been conceived.
The conceptualisation of new power transmission projects is finalised by PGCIL based on
overall transmission system requirements, in consultation with the CEA and other
interested parties, including generators, intended beneficiaries, state transmission
utilities (STUs) and traders. Before the finalization of any new transmission project,
the beneficiaries are identified and targeted, and the generating capacity that such
project will service is allocated among the beneficiaries in accordance with the
requirements and availability of the region. The entire tariff for the transmission system
is shared by the beneficiaries. The tariff, which is set according to CERC regulations, is
recovered from the beneficiaries irrespective of the actual transmission of power.
PGCILs transmission projects fall into the following broad categories:
Generation-linked transmission projects, to facilitate the transfer of power froma specific new interstate or inter-regional generation project to its intended
beneficiaries;
Grid-strengthening projects, to strengthen power transfer capacity and add toreliability and security; and Inter-regional transmission projects, to strengthen power transfer capacity
between regions and allow for inter-regional power exchanges.
The types of projects identified above facilitate the development of integrated regional
power grids and the national grid. Upon the finalisation of a scheme, a Feasibility cum
Detailed Project Report (FR) is prepared. This report addresses the justification for the
project, the scope of work, cost estimates, pricing, financing and other matters, and is
prepared for the consideration of the competent approving authorities.
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ii. Design & EngineeringPGCIL have in-house competency in the design and engineering of EHV systems up to
800 kV AC, and HVDC systems up to 500 kv. and also have experience in the design and
engineering of transmission lines and substations for different wind zones, climatic
conditions, seismic zones, terrains, seashores and tough hilly terrain. The company
possesses advanced software tools for electric system simulation studies and for thedesign of various kinds of towers, substation structures and foundations, including in
regard to the electrical line parameters of transmission line and sub-station design,
insulation co-ordination, grounding and other matters.
PGCIL is also finalizing, in association with a number of renowned international
consultants, the design and technical specifications for an 800 kV HVDC system, which
to the companys knowledge has so far not been implemented anywhere in the world.
iii. Tendering process and award of contractsProcurement requirements for a project are divided into a number of well defined
contracts and are awarded on a competitive bidding basis. In each case, qualifying
requirements for bidders are stipulated and the bids are evaluated by a tender
committee. Award recommendations are put up for approval to the appropriate
authorities consistent with the applicable delegation of powers in the Company. The
highest authority for the approval of any award recommendation is The Board of
Directors. In the case of contracts funded by multilateral agencies, the awardrecommendations are also sent to them to confirm that they have no objection.
The tendering process is subject to guidelines of the GoI; applicable guidelines of
concerned multilateral funding agencies such as the World Bank and the Asian
Development Bank that are financing the project; guidelines or similar terms set out in
any applicable loan agreement; and PGCILs own Works & Procurement Policy and
Procedures (WPPP), which were established to strengthen transparency.
iv. Detailed engineeringAfter contracts are awarded, detailed engineering is carried out as per the tender
specifications, site conditions and applicable domestic and international standards and
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practices. Drawings and related documents are either generated in-house or prepared
and submitted by the contractor. These are checked and approved to ensure
compliance to the stipulated technical specifications and requirements and the site
condition before the project is taken up for construction. Only type-tested equipment
conforming to technical requirements and applicable national and international
standards are put into service as part of the companys transmission line and substation
infrastructure.
Over the years, PGCIL have standardized most of its designs and technical specifications
to save time on detailed engineering in respect of items which are of a repetitive nature.
v. Quality assurance and inspectionIn order to ensure the quality implementation of various projects, PGCIL have adopted a
total project quality assurance and inspection concept. The company have developed
and implemented systems and procedures aligned to the requirements of ISO-
9001:2000 (Quality Management Systems), ISO14001:2004 (Environment ManagementSystems) and OHSAS 18001:1999 (Occupational Health and Safety Management
Systems). PGCIL have been certified for compliance to these standards and
specifications by international accredited bodies.
The company specifies quality requirements in the technical specifications for projects,
and vendors and sub-vendors are selected based on stipulated qualifying and technical
requirements. Goods and equipment are manufactured as per the agreed quality plan,
and there are check points to confirm that technical requirements are being met at
different stages of manufacturing. The process is also monitored for quality assurance
during manufacturing. Major components and raw materials are sourced from approved
sub-vendors of acceptable quality. PGCIL also carry out quality surveillance and process
inspection periodically at the manufacturing facilities of vendors. The final product is
tested according to national and international standards before it is dispatched to the
project site for installation. The company also implement agreed field quality plans to
ensure quality during installation and the testing and commissioning of goods and
materials at the site. PGCIL have inspection offices around the country so that it can
make timely inspections and have also implemented a web-based inspection
management system for the total inspection process.
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vi. Project monitoringFor the purpose of project implementation as well as operation and maintenance, the
companys operations are divided on a regional basis. While the awarding of major
contracts is done from the corporate headquarters, post-award contract management is
done by the regional offices. A centralised Monitoring Group, located at the corporate
and regional headquarters, monitors the implementation of projects and keepsmanagement informed about progress and critical areas requiring their 0intervention.
Grid Management and Load Despatch Function
A crucial aspect of the operation of an electric power system is the management of load
despatch in real time with reliability and security on an economical basis. PGCIL have
modernised the existing five RLDCs and state load despatch centres and their communication
networks, down to the level of individual substations. The company undertook and completedthis work under the ULDC Project. The company is currently establishing a National Load
Despatch Centre (NLDC), which it expect to complete in 2008.
Based on the declared capacity of interstate generating stations and the entitlements of states/
beneficiaries, daily generation schedules are prepared. Deviations from these schedules by
either generators or customers attract unscheduled interchange (UI) charges.
In certain circumstances, including in the case of unscheduled demand or unscheduled supply,
there can be mismatches of demand and supply of electric power across the system. In such
circumstances, the ISTS may be put under strain, and the company, acting as the load despatch
manager, may instruct generators to curtail their generation or load centres to refrain from
drawing the power they are seeking to draw, notwithstanding their regular contract
arrangements.
Role of PGCIL in Distribution and Rural Electrification
In general, distribution refers to the movement of electric power after it leaves transmissionand moves downstream towards consumers. The electric power distribution system in many
parts of India is in need of modernisation, capacity expansion and sectoral reform. The GoI has
taken a number of initiatives to improve electric power distribution in general and rural
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electrification in particular. One of these is known as the APDRP and another is known as the
RGGVY.
Under the APDRP, PGCIL have been appointed as an Advisor-cum-Consultant (AcC), and in
that role is consulting on and monitoring the development of 178 electricity distribution
schemes spread over 18 states, covering urban and semi-urban areas. PGCIL is alsoimplementing distribution improvement schemes in seven of those states, namely Bihar, Goa,
Gujarat, Meghalaya, Uttar Pradesh, Tripura and Mizoram. The company implements these
schemes by following a process that includes design, engineering, the awarding of contracts,
inspection and monitoring.
Under the RGGVY, PGCIL have entered into agreements to implement rural electrification
projects on behalf of SPUs in nine states, namely Bihar, Uttar Pradesh, West Bengal, Gujarat,
Rajasthan, Orissa, Chattisgarh, Assam and Tripura. These projects entail the progressive
provision of infrastructure for approximately 88,000 villages in 68 districts. Through December31, 2006 PGCIL have implemented the electrification of over 8,800 villages in the states of
Bihar, Uttar Pradesh, West Bengal, Gujarat and Rajasthan.
Other Businesses
i. ConsultancySince Fiscal 1995, the company has provided transmission-related consultancy advice to
approximately 90 clients in the context of over 200 assignments, both domestically and
internationally. These consultancy services include system engineering and feasibilitystudies, the review of load despatch and communications systems, contract and
procurement services, turnkey execution of transmission and sub-transmission projects,
supervision of rural electrification projects, the implementation of intrastate availability-
based tariffs and the preparation of distribution code.
PGCIL acquire its consultancy assignments through bidding processes, from marketing
and from potential clients approaching us. The company take on a wide variety of
assignments, so long as it believe that it have the in-house expertise needed to provide
assistance. The company staffs its assignments with teams of specialists from
throughout its organisation. Employees take on consulting duties that fit within the
areas of expertise they have developed by working in our core business. A central
department coordinates, facilitates and supports service delivery.
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Domestic clients include almost all of the state power utilities in India. Among others,
PGIL have undertaken and are currently undertaking international consulting
assignments in Nepal, Bhutan and Afghanistan. The companys assignments tend to fall
into one of three broad categories:
Work under the APDRP and the RGGVY;The execution of transmission- and communication system-related projects on aturnkey basis; and
Technical consulting assignments for Indian utilities and utilities in other countries.The company seeks to leverage its experience in the power transmission sector to
continue to expand the consultancy operations in India and abroad.
The following table sets forth certain information in respect of a selection of our larger
or otherwise more notable consultancy assignments:
1. Completed
Assignment Client Year of Award
Turnkey execution of transmission line
from Indra Sagar to Indore
MPSEB FY04
Strengthening of sub-transmission
scheme in Bihar
BSEB FY04
Turnkey execution of 400kV DC Vishnu
Prayag-Muzaffarpur transmission line
UPPCL FY03
Augmentation of sub-transmission and Electricity Department FY03
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distribution system in Northern Goa of Goa
Turnkey execution of 220kV transmission
line and upgrading of Tivim substation.
Govt. of Goa FY02
Turnkey execution of 110/11 kV
substation and LILO line at
Pillaithiruvasal, Kairakal
Pondicherry FY00
2. Ongoing
Assignment Client Year of Award
Construction of NLDC at Thimpu in
Bhutan
Bhutan Power
Corporation
FY07
Strengthening of sub-transmission
scheme under Phase II, Part 1
MOP, Govt. of Bihar
and BSEB
FY07
Field survey and preparation of bid
documents for Turkmenistan
Sheberghan transmission line
AEAI/ USAID FY07
Establishment of SLDC at Rishikesh and
two sub-LDC at Kashipur and Dehradun
UPTCL FY06
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Turnkey execution of 400kV transmission
system
WBPDCL FY06
Accelerated electrification of villages and
rural householsa in Uttar Pradesh
Porvanchal Vidyut
Vitran
FY05
During FY08, PGCIL secured 34 nos. of new consultancy assignment with project cost of
about Rs.1,840cr.l Company has realized consultancy fee of about Rs.235 cr. from its
ongoing consultancy projects during the year.
ii. Telecommunication
PGCIL have diversified into the telecommunication business by creating a
telecommunication network principally using our overhead transmission infrastructure. Thecompany own and operate a fibre-optic cable network that as at March 31, 2007 consisted
of over 19,000 kilometres and connected over 60 Indian cities, including all major
metropolitan areas. The company has been leasing bandwidth on this network to more than
60 customers, including major telecom operators such as Bharat Sanchar Nigam
Limited,Videsh Sanchar Nigam Limited, Tata Teleservices Limited, Reliance Communications
Limited and Bharti Airtel Limited.
The companys telecommunication network benefits from the extensive geographic reach
of its power transmission network. PGCILs telecommunication network covers substantially
all the main territories of India. In addition, the company is currently one of the few
telecommunications network providers that have a presence in remote areas of India, such
as Jammu & Kashmir, Himachal Pradesh and the North Eastern region (Assam, Manipur,
Meghalaya, Nagaland and Tripura).
The total capital expenditure approved by the Cabinet Committee on Economic Affairs
(CCEA) for the establishment of our telecommunications network is Rs. 9,342.3 million.
Beyond this, further capital expenditure will be governed by market requirements.
PGCIL have been granted the Infrastructure Provider-I (IP-I) and Internet Service Provider
Category-A (ISP-A) licences. In July 2006 the company acquired a National Long Distance
(NLD) License, which increases its target market by enabling it to offer its services to non-
licensed service providers such as entities in the corporate, government and defence
sectors. Since then, the company has added such end-user customers as the Indian Army,
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Indian Intelligence Bureau, Central Reserve Police Force, National Infomatics Centre and a
number of corporations, including Infosys Technologies Ltd. and Ericsson India Pvt. Ltd.
Under its NLD License, the company may participate further in the national long distance
business through tie-ups with other telecom service providers.
From its telecommunication business, PGCIL received revenue of Rs. 125 Crore during FY
2007-08, a growth of 62% over last year (Rs. 77 Crore). Today, PGCIL is serving majortelecom players in mobile & NLDO segment and is also planning to tap customers in
entertainment and broadcasting industry.
Research & Development
PGCIL is constantly striving to excel in its technological leadership which is essential for
sustainable business growth and to maintain competitive edge over others in national and
international market. The organization through its technological leadership is catering to
diverse geographical climate and terrain conditions utilizing existing transmission infrastructure
along with creating new transmission capacities in a cost effective manner. Towardstechnological advancement, PGCIL has established several fully automated remote controlled
400kV substations like Bhiwadi, Kolar, Gajuwaka, Chandrapur etc. Many more sub-stations are
being planned on similar lines with a view to optimize upon operational costs.
PGCIL has also introduced INVAR power conductors, which can sustain high temperature upto
2000c against the normal 85
0c. This can wheel electric power more than two times the normal
line. PGCIL also using Thyristor Controlled Series Compensation (TCSC) and uprating/upgrading
of lines etc. to enhance power carrying capacity of existing lines. Futher, in order to conserve
the precious Right of Way, width of 765 kV transmission towers has been reduced from usual
85 mtrs. To 64 mtrs. For the first time in the world. Further, at selected location the tower
height was raised to 75 mtrs., which makes it taller than the Quatab Minar, to save precious
forests and protect wildlife. PGCIL commissioned 400kV Gas Insulated Substation (GIS), first
time in the country at Maharani Bagh, New Delhi, which reduced 75% land requirement over
conventional EHV Air Insulated substation. Besides, 765kV Single Circuit Sipat-Seoni
transmission line was commissioned to evacuate bilk power from pit head power station at
Sipat, which is first time at 765 kV level, operating in the country.
PGCIL envisages established a Centre for Power Transmission Research and Application which
shall supplement the facilities of existing Research Institutions and provide opportunities forapplied research in power transmission sector. PGCIL has also constituted an advisory body
consisting of eminent experts from power utilities, research and academic institutions and
consultants from India as well as from Canada, USA and Brazil to facilitate adoption of latest
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technologies for construction, monitoring and maintenance of transmission system suiting
Indian conditions.
Peer Group Comparison
Name of the
company
CMP
(As on, Feb.
26, 2009)
Market
Cap.
(Rs. Mn.)
EPS
(Rs.)
P/E
(x)
P/BV
(x)
Dividend(%)
Power grid 92.35 388686.50 3.44 27.00 2.88 5% (For FY09)
Tata Power 730.90 1522112.70 35.17 20.78 11.45 10% (For FY08)
NTPC 184.20 161812.30 9.01 20.44 0.51 9% (For FY09)
Neyveli Lignite 73.90 123982.70 6.47 11.42 1.37 10% (For FY08)
Key Concerns
A major part of the companys income derived from the transmission of powerto the State Power Utilities and many of them have a weak financial position.
Higher debt level.
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Financials12 Months Ended Profit & Loss Account (Standalone)
Description (Rs. Million) 31Mar.08A 31Mar.09 E 31Mar10E
12m 12m 12m
Net Sales 46,148.20 59,843.44 70,016.82
Other Income 4,667.10 3,737.75 4,201.01
Total Income 50,815.30 63,581.19 74,217.83
Expenditure 10,518.00 9,720.69 10,152.44
Operating Profit 40,297.30 53,860.50 64,065.39
Interest 13,395.50 25,329.75 25,329.75
Profit Before 26,901.80 28,530.75 38,735.64
Depreciation And Tax
Depreciation 9,596.50 10,891.31 11,902.86
Profit Before Tax 17,305.30 17,639.44 26,832.78
Tax 2,820.60 2,479.61 4,024.92
Profit After Tax 14,484.70 15,159.83 22,807.87
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Equity Capital 42,088.40 42,088.40 42,088.40
Reserves 92,985.30 108,145.13 130,953.00
EPS (Rs.) 3.44 3.60 5.42
A=Actual, E=Estimated
Quarterly Ended Profit & Loss Account (Standalone)
Quarter Ended on ---> 30 June 08 30 Sep.08 31 Dec. 08 31March09E
Description (Rs. Million) 3m 3m 3m 3m
Net Sales 12,940.30 15,876.90 14,774.40 16,104.10
Other Income 1,138.80 852.8 852.3 893.85
Total Income 14,079.10 16,729.70 15,626.70 16,997.95
Expenditure 2,264.80 2,383.20 2,504.90 2,567.79
Operating Profit 11,814.30 14,346.50 13,121.80 14,430.16
Interest 5,639.90 7,024.00 6,002.60 6,663.25
Profit Before 6,174.40 7,322.50 7,119.20 7,766.91
Depreciation And Tax
Depreciation 2,637.90 2,744.50 2,746.10 2,762.81
Profit Before Tax 3,536.50 4,578.00 4,373.10 5,004.10
Tax 479.60 613.7 649.6 736.71
Profit After Tax 3,056.90 3,964.30 3,723.50 4,267.39
Equity Capital 42,088.40 42,088.40 42,088.40 42,088.40
EPS (Rs.) 0.73 0.94 0.88 1.01
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Charts
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1 Year Comparative Graph
POWER GRID CORP. BSE SENSEX
Outlook and Conclusion
Power Grid Corporation (PGCIL), a NAVRATNA PSE, is Indias principal electric power
transmission company. The company is planning to spread its business overseas. It is eyeing
opportunities in West Asia and The African markets. The company has plans to increase its
power lines network by 11% in FY09 and the total targeted investment for the year is Rs.85
billion. PGCIL wants to add 8,000km. of lines to its existing network of 70,000kms in this year.
To enhance its business, the company is looking forward to form new joint ventures and
subsidiaries.
At the market price of Rs.92.35, the stock trades at 25.69x and 17.08x for FY09E and FY10E
respectively. On the basis of EV/EBDITA, the stock trades at 8.10x and 7.46x for FY09E and
FY10E respectively. Earning Per Share (EPS) of the company for the earnings of FY09E and FY10E
are seen at Rs.3.60 and Rs.5.42 respectively. We expect the topline and bottomline of the
company will grow at a CAGR of 25% and 23% respectively over FY07 and FY10E. We
recommend to BUY this stock with a target price of Rs.114.00 for long term.
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Industry Overview
The power sector is high on India's priority as it offers tremendous potential for investing
companies based on the sheer size of the market and the returns available on investment
capital. In the past few years, there has been considerable growth in power plants based on
renewable sources of energy.
The All India installed capacity of electric power generation stations under utilities stood
at147402.81 MW with thermal power plants constitute 64.6% ( coal-53.3%, gas-10.5% and oil-
0.9%) of the installed capacity followed by 24.7 from hydro power, 2.9% nuclear and 7.7%
renewable sources. The power sector has seen a growth at a CAGR of 5% over the last five
years.
Sector MW %age
State Sector 76185.57 52.5
Central Sector 48970.99 34.0
Private Sector 22246.05 13.5
Total 147402.81
Source: Mini. of power
India has the fifth largest electricity generation capacity in the world- low per capita
consumption at 631 units; less than half of China.
Generation
Overall generation in the country has been increased from 662.5 BU during 2006-07 to
704.45BU in 2007-08. There has been significant improvement in the growth in actual
generation over the last few years. As compared to annual growth rate of about 3.1% at the
end of 9th Plan and initial years of 10th Plan, the growth in generation during 2006-07 and
2007-08 was of the order of 7.3% and 6.33% respectively.
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Year Generation (Billion Units)
1990-91 264.3
1995-96 380.1
2000-01 499.5
2001-02 515.3
2002-03 531.4
2003-04 558.32004-05 587.4
2005-06 617.5
2006-07 662.5
2007-08 704.5
Source: Ministry of Power
The electricity generation target for the year 2008-09 has been fixed at 744.344 BU comprising
of 631.270 BU thermal; 118.450 BU hydro; 19.000 BU nuclear; and 5.624 BU import.
Transmission & Distribution
Indias transmission and distribution network consists of 5.7mn. circuit kilometers makes it the
third largest in the world. The entire country has been divided into five regions for transmission
systems like Northern Region, North-Eastern Region, Eastern Region, Western Region and
Southern Region.
The Government of India has an ambitious mission of POWER FOR ALL BY 2012. This missionwould require that our installed generation capacity should be at least 2, 00,000 MW by 2012.
In order to ensure that the generated power reaches the entire country, an expansion of the
regional transmission network and inter regional capacity to transmit power would be
essential.
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CUMLATIVE GROWTH IN TRANSMISSION SECTOR and PROGRAMME FOR 11th
PLAN
Unit
At the end
of VIII Plan
ie March1997
At the end
of IX Plan
ie March2002
At the end
of X Plan ie
March2007
At the end
of XI Plan
ie March2012
Transmission Lines
VIII Plan IX Plan X Plan XI Plan
765 kV ckm 409 971 1704 7132
HVDC +/- 500kV ckm 3138 3138 58728 11078
HVDC 200kV
Monopoleckm 0 162 162 162
400kV ckm 36142 49378 75772 125000
230kV/220kV ckm 79601 96993 114629 150000
Total Transmission
Lineckm 119290 150642 198089 293372
Substations
VIII Plan IX Plan X Plan XI Plan
HVDC BTB MW 1500 2000 3000 3000
HVDC
Bipole+MonopoleMW 1500 3200 5200 11200
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Total-HVDC Terminal
CapacityMW 3000 5200 8200 14200
765kV MVA 0 0 2000 53000
400kV MVA 40865 60380 92942 145000
230/220kV MVA 84177 116363 156497 230000
Total- AC Substation
CapacityMVA 125042 176743 251439 428000
Source: National Electricity Plan(vol-II) Transmission
The majority of generation, transmission and distribution capacities are either with public
sector companies or with state electricity board (SEBs). Private sector participation is increasing
especially in Generation and Distribution.
Potential & Outlook of Power Sector
Large demand-supply gap: All India average energy shortfall of 9.9% and peak demandshortfall of 16%.
The implementation of key reforms is likely to foster growth in all segments:o Unbundling of vertically integrated and distribution network.o Open Access to transmission and distribution network.o Select distribution circles to be franchised / privatized.o Tariff reforms by regulatory authorities.
Opportunities in generation for:o Ultra Mega Power Plants (UMPP) 6 projects of 4000 MW each.o Coal based plants at pithead or coastal locations (imported coal)o Natural gas/CHG based turbines at load centers or near gas terminalso Hydel power potential of 150000MW is untapped as assessed by the
Government of India.
o Renovation, modernization, up-rating and life extension of old thermal andhydro power plants.
Opportunities in Transmission network ventures-additional 60,000 circuit km. oftransmission network expected by 2012. Government is planning to reduce the T&D
losses to 15% by 2012.
o Private sector participation possible through JV and 100% equity mode.
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Total investment opportunity of about US$200 billion over a five year horizon. Over 78,000MW of new generation capacity is planned in the next five years.
_________________________________________________________
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transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but we do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its
affiliates shall not be in any way responsible for any loss or damage that may arise to any
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basis for an investment decision.
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